My name is Derek Ifasi, I’m the owner of a Fosse Financial Group. Today I want to discuss about the retirement at age 62. A lot of people decide to retire when they are working, which I’m going to call quits. Age 62 could not come soon enough, so I just want to show you a couple of different platforms to help you understand how to make sure that you’re taking distributions properly out of your retirement account and some different things to be mindful of in ways that you could leverage your existing retirement accounts.
Make sure that you do not run short of your retirement money and essentially outlive your retirement income, you know. When you need it most, when you’re in your 70s when you’re in your 80s. Let’s get started a major reason why age 62 is very important because it’s tied to the current Social Security, which will give you a reduced benefit at age 62.
So a lot of people look at that age 62, which is going to be my point. This is going to be when I’m going to start, taking Social Security earlier. Make sure that you are receiving that income year by year because obviously, this individual pays into the Social Security system to be able to receive some benefit from it.
But it’s understandable that they don’t want to wait until age 66 or 66 and two-thirds. They understand if they take at age 62, they are going to have a reduced benefit well. Social Security is typically what we rely upon. Unfortunately, for the majority of individuals it’s their sole retirement income source.
But there are ways that you could leverage your other retirement accounts, your 401k, your IRA, your cash accounts and make sure that you’re also receiving a sort of income in retirement in conjunction with Social Security. What do I mean? Let’s say if somebody retires at age 66, if he will pull out Social Security, he is going to be receiving $2,000 per year or at 862 of its are two thousand dollars per month or at 86 he will receive two thousand dollars per month, which would equate to about $24,000 per year.
Or at age 62, they would be able to receive fifteen hundred dollars per month, which would equate to eighteen thousand dollars per year. Why exactly is the Social Security Administration, why are they setting it up this way? It’s very simple. Obviously, if you take it at age 62, they have to give you a reduced benefit because of this.
Let’s say this individual lives to age 80, but he decides to wait until age 66, or he takes at age 62, but he still lives to age 80. Obviously, you’re going to have an additional four years of income coming to you. So the SSA understands that’s why they’re going to give you a reduced benefit.
But let’s say if $18,000 is your number and you understand. Based upon your budget and your expenses, you need an additional twenty two thousand dollars that have to come to you, right to make up and even $40,000 to come to you every single year.
How exactly you’re going to receive the other $22,000? This is just a hypothetical situation, but a lot of individuals say, I have this 401 K. That’s kind of sitting there and might be a five hundred thousand dollars. I might have an IRA contract sitting. There for another hundred thousand dollars or just regular cash, that’s sitting there for another 50 thousand dollars.
Some of the most important aspects that you can understand with your retirement accounts, you have specific rules or certain restrictions to take from retirement accounts. They’re known as qualified retirement accounts, which means that you couldn’t touch this money before age 59 and a half.
And now that you hit age 59 and a half, you have to touch this money before age 72 and a half, which is known as a required minimum distribution. So an individual, let’s say a 401k account that’s sitting, there are 500,000, they just retired. They could go and roll out a portion of this into a specific IRA contract.
It’s like two terms so that you are not getting penalized, you’re not getting fully taxed on that money you’re rolling over to an IRA contract with the type of income rider attached to it. So this IRA contract is something that we set up to recommend specifically to that situation.
But the $500,000, maybe it’s going to cost only three hundred thousand dollars to produce that specific goal to pursue that contractual guarantee of twenty-two thousand dollars. That’s coming to that individual and every single year and is known as maximum income strategies and something that we utilize in-house as the retired sharp planning system.
So if you have five hundred thousand and you leverage three hundred thousand to an IRA contract, you understand the IRA contract could turn on a lifetime income stream. It’s essentially taking your money, but it’s a big question mark in retirement, because you didn’t know what happened.
If you decide to take that 401k account, you start taking distributions from it, and you’re taking out twenty-two thousand dollars per year. I have five hundred thousand dollars, essentially, if I pull out money from this account, I should be able to outlive this money.
I should not be able to outlive this money because you take five hundred thousand divided by twenty-two thousand dollars, which would equate to twenty-two years. So I’m 62, if I’m going to live to age 84, I should be able to safely pull out twenty-two thousand dollars for my retirement account. And I have to worry about that.
This is what happens. This is the mindset a lot of people have, they just slowly pull it out and don’t have to worry about it. Becaus1
e they think they aren’t going to live to their 80s. First of all, mortality tables have already told you that it’s wrong, especially if you’re married. Your mortality rates meet the likelihood that you’re going to surpass.
Age 80 has greatly increased on the top of this 401k account, where these types of qualified accounts, these retirement accounts, they fall victim to something known as reverse dollar cost averaging. Let’s say if you had a 401 K, in this example, it’s a not specialized IRA contract with five hundred thousand dollars.
Basically, my recommendation is that you go, you make sure that you take place the specific portion of dollars that would equate to a specific income rider that will give you that twenty two thousand dollars in this example, rather than playing that big guessing game and saying. I have five hundred thousand dollars of my IRA contract, you have five hundred thousand dollars in your IRA contract which can be invested in mutual funds.
Because that’s how I’ve accumulated this money, let me try to leave it in mutual funds and pull out money from this account. Now, what do I mean by that? Anytime you place your money in mutual funds, you’re going to have to spend, you have to pay some mutual fund related fee there on top of it.
A financial adviser that’s monitoring this account and giving recommendations on that mutual fund, they’re going to charge you a fee as well. Typically, the mutual fund related fees are average around 1% advisor fees, average right around 1%. It’s typically higher than that, we’ll use 1% just as an example, which means already before the market performs, you’re negative 2% in the whole.
If you experience some downward market loss, like in 2008, all those individuals though that they are sitting at a million dollars or five hundred thousand dollars. And then the next year, they looked at their portfolios, and they were sitting out half of it. The average portfolio lost 57%, some individuals lost more than 57%, others lost less than 57%.
But the underlying premise is how exactly you can reduce these negatives and eliminate them in a given scenario. Let’s say now is the year when I’m at the age 62, you want to retire, and you decide to turn on income or start pulling out money from that. But the market crash is 10 %, and you decide.
I decide to take out the income of 5%, you’re just guessing, and you think you are going to take out 5% worth of money or even in this example, $22,000 is exactly four point four percent. You would have taken out four point four percent, which is $22,000. But you would have ended up losing four points four plus ten plus one, plus one sixteen points four percent worth of value, which equates to $82,000.
So you would have taken out twenty-two thousand, but you would have lost eighty-two thousand dollars worth of value further. You’re reducing your $500,000 to four hundred and eighteen thousand dollars total, so the next year, if you go and decide to take out four point four percent.
First, it’s going to be a higher percentage, because you still have to pull out twenty-two thousand dollars and it’s going to further reduce this account. Especially if you’re paying fees and you’re potentially paying for that downward market loss. So there are ways on specifically designed IRA contracts through insurance companies which give you that peace of mind, maybe at 500 thousand or 300,000.
You go designating to one of those IRA contracts with specific living benefit riders attached to them. So when you roll over 300,000, it said through insurance companies got to look at this. Now the 300,000 is like a bucket with a little bit of a lid over it. Anytime the market goes up, you will increase, this bucket will increase. Anytime the market goes down, you will have that flow of 0% on top of it.
We make sure in that specific situation that you could attach a specific living benefit income rider to it. And may be saying if I want to start pulling out money in two years or in 30 days, whatever that is. We make sure, specifically based upon your state, your dollar amount and your goal, 22 thousand dollars would come to you for the rest of your life or yours and your spouse’s life.
However, you design how it is done. So 500 thousand, you only leverage three hundred thousand into a specific financial contract, while two hundred thousand could be your phone money, that’s where you could invest in the stock market, that’s what you could have fun with.
You could take that chance of the downward market losses, but what you don’t want to do is to pull out money from an account that could specifically and potentially go down and that’s where many retirees make that mistake over and over again. So what we want to show you to avoid is mainly something known as reversed, all that cost averages these specific types of accounts.
Do not have any mutual fund related fees, do not have any advisor fees attached to them, do not have downward market loss attached to that. Because we have that flow of 0%, and the income would be contractually guaranteed, through that insurance company lifetime income would come to you or your spouse.
However, you design it and make sure that you are maximizing all those other monies above. What your bare-bones minimum has to accomplish, so, at the age of 62, you can have Social Security income that comes to you of $18,000.
You could have this specific IRA and the income Rider that comes to you of $22,000. Then in that scenario, you would have another 200,000 and an IRA contract that you could have cash accounts or money market accounts, that’s very liquid mutual funds. You would have another hundred thousand dollars from the other IRA contract, and then the fifty thousand dollars of cash that you’ve never touched.
So you have your maximizing, all the money that you could potentially leave as an inheritance, you can maximize all the money that you could potentially utilize for a risky basis and have that peace of mind that you’re receiving forty thousand dollars based upon the hypothetical situation.
But just make sure that you’re taking that question mark out of retirement, and you’re making sure that you’re getting from point A to point B successfully by utilizing the correct strategies and the correct financial products within your specific area. And it’s not just taking a guess.
If you’re 60 years old and you want to retire at the age of 62, there’s a space, and you’re in a specific state. There has to be a direct strategy that correlates to your situation with our retired sharp planning system. We go on average for each that calls in which has a specific goal or specific gap. We go over 1200 different product lines and scenario proprietaries to our company proprietary to Fossey Financial Group, so that we know that we have all these different options available to them.
We’re going to give you the top three recommendations, this is why we are a plus right on the Better Business Bureau. We’ve never had any complaints, we’ve always had very good reviews, because we go through a very methodical process of the system of checks and balances, making sure that you’re confident, making sure that you’re controlling the chips. And at the end of the day, all it is a big game of leverage.
If you know exactly the negatives to any accounts and you understand the worst case scenario, and how exactly do you eliminate the worst case scenario, make sure that you’re constantly utilizing the best tools to accomplish your goal to build your retirement nest egg, to build your retirement plan. What we’re trying to do is to show you the proper way on how to do it and dissect it, confusing financial language and do it in the proper way.
We are available 24 hours a day, seven days a week to keep up with the national volume that does come in through. Our number is 1-800-562-9830, I’m the owner of a foster Financial Group, I want to thank you very much for reading, and please be on the lookout for some of our newest content on a weekly basis. Thank you.